A REPRISE OF SIZE AND RESEARCH-AND-DEVELOPMENT

Numerous studies have shown that within industries, the propensity to perform R&D and the amount of R&D conducted by performers are closely related to the size of the firm, while R&D productivity declines with firm size. These findings have been widely interpreted to indicate tha t there is no advantage to large firm size in conducting R&D. We show how a simple model based on the idea of R&D cost spreading can explain the prior findings about the R&D-firm size relationship, as well as a dditional features of the R&D-firm size relationship, implying an adva ntage to large size in R&D.